Last week, Pennsylvania Governor Tom Wolf announced that student loan forgiveness through Public Service Loan Forgiveness (PSLF) and Pennsylvania Student Loan Relief for Nurses (SLRN) won’t be considered taxable income at the state level.
Although the Biden administration ruled earlier this year that student loan forgiveness was no longer subject to federal income tax, Pennsylvania was among the few states that still imposed a state income tax on those amounts. Wolf says that this new regulation will remove a barrier for those working to make a difference in the state.
“The point of student loan forgiveness programs for public servants is that these are people who have chosen jobs, often in lower-paying fields, because they want to make a difference,” said Wolf in Friday’s announcement. “We need to make sure that financial burdens don’t keep our best and brightest from taking on some of our most important jobs.”
Both PSLF and SLRN promise to forgive a portion of borrowers’ student loan balance in exchange for years of work in a public service job. Historically, forgiven amounts were counted as taxable income through federal and state governments, meaning that even if public servants qualified to have their student loans forgiven, they could still be hit with a lump-sum bill totaling thousands of dollars.
Federal income tax on forgiven student loans is currently suspended through at least 2025, though experts have suggested that this regulation could be made permanent. Pennsylvania removing the state income tax requirement on PSLF and SLRN forgiveness adds another critical layer, ensuring that public servants can receive forgiveness without negative financial implications.